2015 IBD Summit Report
I just returned from three days of productive industry conversations at the 2015 IBD Summit, the annual gathering of bicycle industry suppliers and retailers. It was great to catch up with old friends and meet interesting new people during the conference and on the hosted bike rides.
The overarching theme of the sold out conference was to assess the current state of the industry, speculate on its future and share ideas on how to evolve in order to meet the needs of a changing market. The slate of speakers and panelists were a mix of professional futurists, industry veterans and best-in-class retailers.
The state of the industry is something that anyone reading this post is well aware of:
- Cycling participation is fluctuating but largely down
- Youth cycling is down
- People for Bikes and other advocacy groups are making progress on access
- Bicycle unit sales have been flat for ten years
- The average selling price of bikes is up
- Margins throughout the industry are down
- The number of retailers is declining
- MAP pricing policies are attempting to help retailers hold pricing
- Online retail is a threat to brick-and-mortar retail
- Omni-channel retail is the proposed best practice moving forward
The majority of the items listed here will require clear leadership and coordinated action from the industry in order to impact significant change. But Harvest, and our retailers, can pivot now to address the final point of omni-channel and I want to share some of my thoughts on the topic in this post.
For those of you not aware of this term, omni-channel retail, it describes a retail philosophy that creates a seamless customer experience for shopping in store and online with a heavy emphasis on data collection and utilization in the marketing process. It is a retail philosophy that allows a traditional local brick and mortar retailer to utilize their online presence to further communicate their values and expand the shopping opportunities for their customers. I firmly believe that this strategy offers the best chance for Trek retailers to succeed in our changing market.
Ideally in omni-channel retailing all shopping channels work from the same database of products, prices, promotions, etc. Instead of perceiving a variety of touch-points as part of the same brand, omni-channel retailers let consumers experience the brand, not a channel within a brand. Merchandise and promotions are not channel specific, but rather consistent across all retail channels. The brick and mortar stores become an extension of the supply chain in which purchases may be made in the store, but are researched through other "channels" of communication. With omni-channel retailing, marketing is made more efficient with offers that are relative to a specific consumer determined by purchase patterns, social network affinities, website visits, loyalty programs, and other data mining techniques.
We learned that during the 2014 holiday shopping season, the nation's largest retailer Walmart, saw that 70% of their online orders were made via their mobile website. Surprisingly, 10% of those mobile purchases were made from inside their stores. These purchases were made by customers who discovered the product they were shopping for was out of stock at the store, the store didn’t have the right size/color or products that they had researched online before visiting simply weren’t stocked at the location they visited.
This is a fascinating development and Walmart’s view on the development can really inform how Trek retailers view this practice. Walmart doesn’t care where their customer shops, online or in store, they only care about how much of each customer’s overall business they can capture.
That is essentially the challenge for Trek retailers. More and more consumers are shopping online. Even a retailers most loyal customers are now spreading their purchases between more local and online vendors than ever before. If a Trek retailer adjusts to this customer behavioral change effectively, then the erosion of sales (especially in accessory categories) could be mitigated.
From the standpoint of today’s customer, and the customer of the future, it doesn’t matter to them whether they shop in store or online. There is no line of distinction for the customer between the two channels, assuming both the store and the store’s website offer quality shopping experience. What speakers at this conference proposed is that retailers need to remove those lines of distinction from their own minds as well.
84% of consumers are using digital platforms to research purchases before they visit a brick and mortar store. And 70% of consumers today EXPECT to be able to view a retailers entire selection online and view what inventory is in stock. These facts make it more important than ever that Trek retailers get their inventory online, with SmartEtailing offering the most convenient solution to do so - largely because they also offer the ability to sell directly from supplier warehouses.
Mark Graff, President of SmartEtailing, shared that according to Forrester Research an omni-channel merchant needs to meet four requirements:
- Have an online catalog with inventory availability
- Offer an “endless aisle” selection (show available items not stocked in the store)
- Offer order fulfillment from warehouse stock
- Have the ability to pick up in the store or ship to home
I would add that not only does a successful omni-channel retailers need these items, they also need to have a strategy for how to utilize their website to showcase their expanded inventory when a customer is inside the store. That can be done with tablet or shopping kiosks. Many of Harvest’s customers already provide this service in some capacity because it is often easier to utilize a SmartEtailing website to find products with a customer than using the myriad of supplier website to achieve the same goal. To be truly successful, Trek retailers should in my belief complete transactions via their websites within the store as well in order to help condition their customers to utilize the website to shop an expanded selection.
In order to achieve a true omni-channel distribution model there is a mountain of work to accomplish by individual retailers, suppliers and marketing companies like ours. But a journey of a thousand miles begins with a single step, and at Harvest we are identifying the best practices that our customers can utilize to start moving in the right direction. And as you will read later, SmartEtailing is exercising a proactive strategy on the issue as well.
David Shing and Digital Convergence
One of the most engaging presentations during the event was from David Shing, AOL’s Digital Prophet. His talk was expansive but most of my notes are related to expectations, characteristics and behaviors of younger consumers who represent the future of our market.
Consumers want choice. What is the consumer going to think when they visit a modern bike store and see the streamlined product selection that a profitable business has to maintain out of necessity? This consumer is used to having the entire “internet of things” available to them at their fingertips and they are used to finding that item for the best possible price. How are retailers going to respond to that? The answer lies in the omni-channel strategy I spoke of earlier.
This consumer is very busy and they need shopping to be fast, convenience and expansive with a great value proposition. Additionally, we learned that this consumer has a set of behaviors and values that are conducive to supporting local retail. This generation values their local community and is willing to alter their behaviors to create positive impact.
David also saw great things for the cycling industry. He sees the next generation starting to use social media in different ways, now less focused on broadcasting to the world and more focused on building closer interpersonal relationships. He sees the bicycle as a wonderful tool that not only encourages relationships with people, but also helps contribute to a better world and a better community. This lines up with the values of young consumers.
As announced in Bicycle Retailer, SmartEtailing is spearheading efforts to develop an industry data exchange which they expect to have online sometime during 2015. This data exchange will contain real-time sales and inventory data, filtered and sorted however the subscriber chooses by region, by category, or some other metric. Some broad, aggregated information would be available for all subscribers to see. This is potentially a monumental development for bicycle retailers.
Additionally, SmartEtailing also announced their new MAP policy tools which make the process of maintaining compliance with brand’s policies much easier for retailers. Pricing will automatically be updated on a dealer’s website, alerts for changes will be sent to retailers to change store pricing and there will be a single listing for retailers to review all MAP policies from suppliers in one place.
I had no previous exposure to this company which I learned has been operating for nearly two years in the industry. This company currently operates as a virtual distributor for many of the industry’s smaller brands. They offer retailers a single vendor contact and payee for ordering a multitude of products, offering terms where applicable. Rumbleship doesn’t warehouse products like a traditional distributor, but rather fulfills out of the suppliers warehouses directly.
The company unveiled an interesting point of sale kiosk on the final day of the show which is specifically designed to address the industry’s need for an omni-channel strategy. This kiosk has a large touch screen display for scanning warehoused inventory. It has a barcode scanner so a customer or employee can take any product in the store, scan it, and browse all sizes and colors from the online inventory. The kiosk has a card swipe built right in so items can be added to a cart and the transaction can be completed directly on the device.
This is an interesting development and certainly an ambitious project for a startup. Time will tell how the company is able to further develop and then implement the tool, but this is certainly noteworthy and worth monitoring for future possibilities. Retailers I spoke with were impressed with the concept, but to be frank, most would like to see this tool offered by SmartEtailing and have the ability to sync with existing POS platforms.
I have pages of notes and had seemingly endless conversations. But this is hopefully a helpful summary for those who were not able to attend. If you are a Harvest customer who has any questions about what I've covered then please feel free to reach out to me directly. As a reminder, I will be speaking at CABDA on Wednesday February 4 at 3pm so if you are attending the show please attend my seminar and we can talk afterwards.